Global Economy Far Worse Off Than Previously Thought, IMF Predicts
LULU GARCIA-NAVARRO, HOST:
This crisis like no other will have a recovery like no other - that from our next guest, the chief economist of the International Monetary Fund. In the wake of this pandemic, the IMF says the global economic outlook is far worse than previously thought, and recovery will take a lot longer. For those living in poor countries, that will mean greater income inequality, more debt and more poverty. Gita Gopinath is the chief economist for the IMF, and she joins us now.
Welcome to the program.
GITA GOPINATH: Thank you for having me on your show.
GARCIA-NAVARRO: And we also have NPR's Jim Zarroli, who covers economics, who'll also be asking questions.
Good morning to you.
JIM ZARROLI, BYLINE: Good morning.
GARCIA-NAVARRO: Gita Gopinath, you predict a much deeper recession this year and slower recovery in the next. What caused you to revise your April estimates so drastically?
GOPINATH: Well, two big reasons. One is if you look at the duration of the lockdowns in the first half of this year, they have been longer than we anticipated, and the intensity has been greater. And secondly, because we don't have a medical solution yet, we expect to see longer, more persistent social distancing into the second half of this year.
GARCIA-NAVARRO: Yeah, you wrote this past week that 75% of countries are reopening, but in the absence of a medical solution, the strength of the recovery is highly uncertain. Did you not know that before, though? Was there some belief early on that this was going to be shorter, considering the fact that the illness was deemed to be serious and global in reach?
GOPINATH: I think - well, we certainly expected that there would not be a vaccine anytime in 2020. But on the other hand, there was an anticipation that as countries expanded their health care facilities, did enough testing, tracing, had enough protective equipment, then they would be much better prepared to deal with this health crisis. I think as of now, we can say that countries are still behind the curve here, which is why we expect this to be a bumpier ride going forward.
GARCIA-NAVARRO: I'm going to press you a little bit on the debt that the poorer nations are taking on because we've seen in the past that it literally takes years upon years to get out from underneath that debt. And we really are in a place where there won't be many places to turn to for those poorer countries to find help.
GOPINATH: It is going to be a serious concern for poorer nations who will come out of this crisis with higher levels of debt. And the solution for that will be multilateral support in the form of debt relief, debt restructuring, concessional financing, concessional aid. I mean, I don't see any other way for these economies to be able to come back up to growth without support from the international community.
ZARROLI: China is a huge lender, especially to developing economies. How cooperative is China being right now in terms of rescheduling debt?
GOPINATH: So China is a part of this G20 initiative to provide debt relief, and so, you know, they are working with the international institutions to help in this respect. You know, I suspect much more will be needed, and this is from all countries, not just from China, for the poorer nations and also for a much longer period of time than till the end of this year.
ZARROLI: You know, there's been a lot of effort by countries all over the world to try to prop up their economies through stimulus spending, support from their central banks. Is there an example of a country, more than any other, that has sort of gotten the economic side of things right in your view?
GOPINATH: I think, actually, many countries have put in substantial support, and this is true particularly for the advanced economies. You know, this is actually unlike the global financial crisis when there was a much slower response, especially on the fiscal side, and it was withdrawn too quickly. This time around, there has been a coordinated response on the fiscal side and on the monetary policy side. And you can see that if you look at the amount of income that's been replaced of people who've lost jobs. That's been quite substantial.
But this - you know, we'll have to adapt over time because over time, you will have to move away from encouraging people to stay at home to encouraging them to return to work. And secondly, instead of just protecting jobs and firms, you're going to have to be able to encourage reallocation of workers away from sectors that are shrinking towards those that are growing.
GARCIA-NAVARRO: Yeah, I want to actually touch on that. There's been no attempt here in the U.S. to do what you advise, which is accelerate the shift to a more productive, sustainable and equitable growth through investment in new green and digital technologies and wider social safety nets. That's not happening here. Will that hurt the U.S. in the long term in your view?
GOPINATH: I think this crisis has taught us an important lesson that you cannot wait to make the changes that are needed in terms of having a greener economy, in terms of having a wider social safety net and having health care for everybody. And every effort should be made to make that transition happen sooner than later.
GARCIA-NAVARRO: Gita Gopinath is the chief economist for the International Monetary Fund, and Jim Zarroli covers business and economics for NPR.
Thank you to you both.
ZARROLI: You're welcome.
GOPINATH: Thank you.
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